What You Need to Know About Pay-Per-Mile Car Insurance

Do you drive less than 10,000 miles every year? Looking to save big money on your car insurance? Pay-per-mile insurance might be right for you!

What is Pay-Per-Mile Car Insurance?

Pay-per-mile insurance is an auto insurance plan that provides full coverage for your car, truck, or SUV based on how many miles you drive. After all, people who are out on the road less are also considered to be low-risk drivers because they’re less likely to get in accidents solely based on the amount of time they spend on the road. 

Securing car insurance by the mile can help you save big time if you drive less than average. 

Who Should Pay for Car Insurance by the Mile?

Pay-per-mile insurance is a great choice for people who don’t spend much time on the road. 

This might include drivers who:

  • Work from home/work remotely 
  • Attend college/university & live on campus
  • Take public transit 
  • Have a second vehicle that isn’t used often 

The average American drives about 12,000 miles per year, or 1,000 miles a month. If you drive less than the national average, pay-per-mile insurance is likely a cost-effective car insurance option for you. 

If you’re not sure if pay-per-mile insurance is a good choice for you, keep track of your miles for a month before committing to this plan. You can download an external mile tracker app to get an accurate picture of your driving habits. 

How does Pay-Per-Mile Insurance Work?

With pay-per-mile insurance, your car insurance premium is broken down into two parts: A base rate and a per-mile rate. 

Your base rate is decided by the insurer, and it remains the same every month regardless of how many or how few miles you drive. Your base rate is calculated like a usual car insurance rate. Insurers look at factors such as age, driving history, and car make/model to come up with this rate. 

Once your base rate is calculated, you add this number to your per-mile rate. The per-mile rate is also based on the same factors that are used to determine your base rate. Depending on how many miles you drive, your total car insurance premium will vary from month to month. 

To get an idea of what a monthly pay-per-mile plan looks like, let’s look at a driver named Terry. Terry has a base rate of $31 per month. Her per-mile rate is 0.06 cents. In the month of May, she drives 400 miles to visit her family. For this month, she will pay a total of $55 ($31 base rate plus 400 miles x $0.06 per mile = $55).

Keep in mind that pay-per-mile insurance is different from usage-based insurance, which mainly focuses on the safe driving behaviors of a driver. 

Ready to see how your pay-per-mile insurance might compare to traditional insurance plans? At Compare.com we help you compare premiums of over 60 carriers. Just put in your zip code below to get started.

How do Insurers Track Mileage?

Pay-per-mile insurance policies require you to track your mileage to give you a monthly rate accurately. Most insurance companies will give you a small device that plugs into a port near your steering wheel. It’s called the on-board diagnostics port, or your OBD-II. For this device to work, you’ll need to be driving a car with the model year of 1996 or newer. 

Some insurers like GEICO have an app that connects to your smartphone to track your mileage. Other insurance companies choose to have you report your mileage yourself by sending in a picture of your odometer every month. 

Pros of Pay-Per-Mile Car Insurance

Some advantages of purchasing pay-per-mile insurance include the following:

You Save Money

If you log less than 8,000 miles a year or around 600 miles a month, pay-per-mile insurance may be for you. You can receive a lower base and per-mile fee that often has a cap for a particular mileage limit. Especially during times like the COVID-19 pandemic, studies have shown that drivers typically cut their time on the road in half. But even during “normal” times, drivers can save big on their monthly bill if they drive less. Plus, when you drive less, you’ll save a lot of money on regular car maintenance too!

You Save the Environment

By keeping track of how many miles you have logged each day, having pay-per-mile insurance can make you more mindful of diminishing your carbon footprint. For instance, instead of driving around for a good parking spot, you may just park further and walk. Or let’s say you live downtown or in a sprawling city, then you may choose to take public transportation instead of driving your car. 

Even if you live in the suburbs, you can choose to carpool or car share to lower traffic congestion and car emissions from polluting the air and harming the environment, all while saving money on your monthly car insurance bill.

You Stay Up-to-Date on Your Driving Habits

man driving with pay-per-mile insurance (1)

Since you’ll keep track of your miles, you’ll become more aware of your driving habits. However, being more conscientious will remind you to practice safe driving habits while out on the road and encourage you to walk or bike shorter distances versus hopping into your car to travel instead. 

It’s good for you, your car, your health, and the environment – a true win/win/win!

Cons of Pay Per Mile Car Insurance

Some disadvantages of purchasing pay-per-mile insurance include things like:

You Might Spend More

You might feel you are saving more by purchasing pay-per-mile insurance, but if you love being in your car and tend to commute for hours on a regular basis, this type of insurance policy is not for you. Even if you work from home, think of how often you drive far to visit family members and friends. How many day trips and road trips do you take each month? Take time to consider your driving habits to determine if it is worth investing in a pay-per-mile insurance plan.

Your Cost is Unpredictable 

It may be difficult to gauge how much your pay-per-mile insurance will be each month since it’s dependent on how many miles you drive. Additionally, you might feel stressed if you tend to drive more than you predicted. In that case, it can be better and give you more peace of mind to get regular auto insurance instead.

Where Can I Get Pay-Per-Mile Car Insurance?

Pay-per-mile is a relatively new form of car insurance, but that doesn’t mean you’ll have to jump through hoops to find a company willing to offer you a policy.

One of the first companies to specialize in pay-per-mile insurance was Metromile, but in the past several years, insurance giants like Allstate and Nationwide have also jumped on the pay-by-the-mile train with their Milewise and SmartMiles programs.

But, regardless of which company you choose, you want to rely on a trusted source to compare your rates and find the best price. Luckily for you, you’ve found the right place – Compare.com

Car Insurance by the Mile Tips

Woman driving a car with pay-per-mile insurance

If you’re planning to sign up for pay-per-mile insurance, you’ll need to get creative with ways to keep your mileage as low as possible.

You can implement the following tips to keep your mileage low:

  • Take direct routes: Leave the scenic route to those with unlimited mileage. Instead, map out the most direct route to all your destinations. You can set your GPS to take the route with the shortest mileage to make sure every trip cuts down on the distance driven.
  • Combine your trips and errands: Instead of heading to the pharmacy across town in the morning then grocery store down the road in the afternoon, consolidate all your trips. Is there a central shopping plaza with all the needed stores nearby? Change your shopping habits to lower your mileage. 
  • Get to know your colleagues and carpool: Do any of your colleagues live nearby? Consider carpooling to work whenever possible. 
  • Ask for remote work: If you need to work on-site, try to negotiate a few days of remote work. This can help you lower your miles driven, especially if you have a long commute. 

Other Telematics Reward and Discount Programs

While some drivers may confuse telematics with pay-per-mile insurance, these two terms mean very different things. While pay-per-mile insurance tracks the number of miles driven by your vehicle, telematics tracks your driving behavior with a device and bases your premium on your driving habits. 

Other telematics monitor your driving habits and reward you with discounts if you meet certain standards. The following telematics programs can help you get discounted car insurance rates:

Allstate – Drivewise

If you’re an Allstate member who signs up for the Drivewise program, you can receive a discount on your auto insurance policy. After 50 trips, you’ll get a discount on your policy every six months. To qualify, you’ll need to keep your driving speed at or below 80 mph, avoid late-night driving and hard braking. 

Nationwide – Smartride 

When you sign up for the Nationwide Smartride program, you’re awarded a 10% discount upon the initial sign-up. You can then save up to 40%, depending on your driving habits. To qualify for the discounts with this program, you’ll need to keep your mileage low, avoid hard braking and rapid acceleration, avoid high traffic areas, and avoid driving between midnight and 5 am. 

Safeco – RightTrack

Safeco Auto Insurance allows you to save anywhere between 5% and 30% on your monthly premium. To qualify for the Safeco RightTrack program, you  need to avoid driving between midnight and 4 am, refrain from hard braking and acceleration, and have all drivers on your policy participate in the program. 

What Are Additional Ways to Save on Pay-Per-Mile Car Insurance?

While switching to pay-per-mile insurance helps you save money initially, there are additional ways to save money on your monthly payments. 

  • Multi-car policy discount: If your family has multiple drivers on the road, consider insuring more than one car to enjoy a multi-car discount. 
  • Safety discounts: Does your car have any additional safety features installed? If so, you may qualify for safety discounts.
  • Anti-theft: Cars fitted with anti-theft devices are viewed as lower risk by insurance companies, as these make your car less prone to theft. If your car is equipped with these devices, you’ll enjoy a discount of 15-20% on your insurance premium.
  • Continuous coverage: If you’re a driver who’s never had a gap in your insurance history, you can qualify for the continuous coverage discount. While the amount varies by insurer, you can see a discount of up to 10% on your policy.
  • Paperless discount:  Do yourself and the environment a favor by going paperless. Insurance companies reward you if you choose to receive all your information electronically with a paperless discount. 
  • Multi-policy discount (bundling): Bundle your car and home insurance together to save additional cash. 

Although there are many discounts to help you save additional money on your pay-per-mile car insurance, don’t forget that comparing car insurance quotes is one of the best ways to save on auto insurance. Use a reputable company to compare quotes and find affordable car insurance with just the right amount of coverage. You can compare rates in just a few minutes at Compare.com.

FAQs about Pay-Per-Mile Car Insurance 

Is pay-per-mile insurance worth it?

It depends. If you’re someone who works from home, has low yearly mileage, and you want an insurance policy that focuses solely on mileage, then pay-per-mile insurance is perfect for you. If you’re someone who is only temporarily driving less, it’s best to stick with traditional insurance. 

How do insurers check my monthly mileage?

Insurers can check your monthly mileage in a few ways. Insures will either ask you to send in a photo of your odometer, or they might track your mileage through a device installed in your car. Some insurers will require you to download an app and track your mileage there. 

How is my pay-per-mile monthly rate calculated?

Your monthly rate consists of your base rate and your per-mile rate. While your base rate remains the same from month to month, your per-mile rate depends on your mileage for the month. If you drive more, you’ll pay more. If you drive less, you’ll pay less.

What is the difference between pay-per-mile insurance and telematics-based insurance?

Pay-per-mile insurance creates a rate that is based on how many miles you drive. Telematics-based insurance uses the data collected by your driving habits to determine your monthly car insurance rate. 


Find out if pay-per-mile insurance is right for your needs